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  • Ryan O.

Insurance Premiums Surge in Hawaii and Nationwide

Honolulu Civil Beat recently reported The Peninsula at Hawaii Kai condominium community was hit with an alarming revelation when their insurance bill for 2024 arrived. To the owners surprise, the association's insurance premium had surged nearly tenfold, skyrocketing to $3.3 million from its previous mark of less than $400,000. This unforeseen spike, could translate to thousands of dollars per year or hundreds per month for residents, posing significant financial strain for many families.

Unfortunately, the Peninsula's plight is not an isolated incident. Condo communities across Hawaii, comprising approximately hundreds of thousands of owners, are grappling with similar insurance challenges. The industry is currently ensnared in what experts term a "hard market," characterized by soaring premiums and limited availability of affordable insurance options. This market dynamic, driven by various factors, primarily impacts condo associations, particularly regarding hurricane insurance.

Rising premiums, he explains, are primarily attributable to escalating claims resulting from catastrophic events such as wildfires in California, hurricanes on the Gulf Coast, and the ongoing COVID-19 pandemic. One notable statistic underlines the severity of the situation: the insurance market faced losses totaling over $100 billion due to a string of severe storms and other calamities.

International Catastrophe Insurance Managers (ICAT) corroborates these observations, highlighting inflationary pressures and increasing claims as significant contributors to premium hikes. The resultant spike in insurance costs extends beyond property coverage, affecting automobiles and other goods, further straining insurers' ability to cover losses adequately.

In addition to these overarching industry challenges, Hawaii faces its unique set of hurdles. Insurers are adapting their criteria for insuring properties, leading to the discontinuation of coverage for certain types of buildings, such as wood frame condo structures. This exacerbates the scarcity of master hurricane insurance policies covering condominiums, leaving residents vulnerable and local agents scrambling for coverage alternatives.

An insurance broker providing coverage for the Peninsula illustrates the severity of the situation. He recounts the arduous process of assembling coverage from multiple insurers, emphasizing the substantial leverage insurers hold in determining premiums.

While some communities, like the Peninsula, manage to cope with rising premiums using alternative funds, uncertainties loom over future financial burdens. Despite the clamor for government intervention, the complexity of the insurance market presents formidable obstacles to regulatory action.

Beyond Hawaii, the nationwide insurance landscape reflects similar challenges. Homeowners and auto insurance premiums are on an upward trajectory, driven by inflation, mounting claims, and a surge in catastrophic events. Insurers are increasingly reliant on raising premiums to offset losses, exacerbating financial burdens for consumers.

As the insurance industry grapples with mounting losses and market volatility, consumers face a stark reality of escalating premiums and diminishing coverage options. While governmental initiatives and consumer advocacy groups strive to address these issues, the entrenched dynamics of the hard market pose significant challenges to achieving meaningful reforms.

-Ryan Oda


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